3 Hold-Rated Dividend Stocks: SLRC, NGPC, EFC

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates.

While plenty of high-yield opportunities exist, investors must always consider the safety of their dividend and the total return potential of their investment. It is not uncommon for a struggling company to suspend high-yielding dividends which could subsequently result in precipitous share price declines.

TheStreet Ratings' stock rating model views dividends favorably, but not so much that other factors are disregarded. Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown as compared to potential profit volatility, i.e. how much one is willing to risk in order to earn profits?; the level of acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's valuation as compared to its stock's performance.

These and many more derived observations are then combined, ranked, weighted, and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of selecting stocks. As always, stock ratings should not be treated as gospel — rather, use them as a starting point for your own research.

The following pages contain our analysis of 3 stocks with substantial yields, that ultimately, we have rated "Hold."

Solar Capital

Dividend Yield: 8.00%

Solar Capital (NASDAQ: SLRC) shares currently have a dividend yield of 8.00%.

Solar Capital Ltd. is a business development company specializing in investments in leveraged middle market companies. The company has a P/E ratio of 12.50.

The average volume for Solar Capital has been 383,800 shares per day over the past 30 days. Solar Capital has a market cap of $849.3 million and is part of the financial services industry. Shares are down 11.3% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Solar Capital as a hold. The company's strengths can be seen in multiple areas, such as its increase in net income, expanding profit margins and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 131515.4% when compared to the same quarter one year prior, rising from -$0.01 million to $17.08 million.
  • The gross profit margin for SOLAR CAPITAL LTD is currently very high, coming in at 70.54%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 61.00% significantly outperformed against the industry average.
  • SLRC, with its decline in revenue, underperformed when compared the industry average of 3.0%. Since the same quarter one year prior, revenues fell by 28.5%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • SOLAR CAPITAL LTD has shown improvement in its earnings for its most recently reported quarter when compared with the same quarter a year earlier. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, SOLAR CAPITAL LTD reported lower earnings of $1.70 versus $3.12 in the prior year. For the next year, the market is expecting a contraction of 8.2% in earnings ($1.56 versus $1.70).
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Capital Markets industry and the overall market, SOLAR CAPITAL LTD's return on equity is below that of both the industry average and the S&P 500.

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NGP Capital Resources Company

Dividend Yield: 10.50%

NGP Capital Resources Company (NASDAQ: NGPC) shares currently have a dividend yield of 10.50%.

NGP Capital Resources Company is a business development company specializing in investments in small and mid size and middle market companies. The company has a P/E ratio of 76.38.

The average volume for NGP Capital Resources Company has been 136,900 shares per day over the past 30 days. NGP Capital Resources Company has a market cap of $125.3 million and is part of the financial services industry. Shares are down 18.2% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates NGP Capital Resources Company as a hold. Among the primary strengths of the company is its expanding profit margins over time. At the same time, however, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity.

Highlights from the ratings report include:
  • The revenue fell significantly faster than the industry average of 3.0%. Since the same quarter one year prior, revenues fell by 42.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The gross profit margin for NGP CAPITAL RESOURCES CO is rather high; currently it is at 51.57%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, NGPC's net profit margin of -0.58% significantly underperformed when compared to the industry average.
  • NGP CAPITAL RESOURCES CO has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, NGP CAPITAL RESOURCES CO reported lower earnings of $0.19 versus $0.80 in the prior year. This year, the market expects an improvement in earnings ($0.43 versus $0.19).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Capital Markets industry. The net income has significantly decreased by 100.9% when compared to the same quarter one year ago, falling from $3.51 million to -$0.03 million.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Capital Markets industry and the overall market, NGP CAPITAL RESOURCES CO's return on equity significantly trails that of both the industry average and the S&P 500.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Ellington Financial

Dividend Yield: 12.40%

Ellington Financial (NYSE: EFC) shares currently have a dividend yield of 12.40%.

Ellington Financial LLC, a specialty finance company, acquires and manages mortgage-related assets, including residential mortgage backed securities backed by prime jumbo, Alt-A, manufactured housing and subprime residential mortgage loans, and residential mortgage-backed securities. The company has a P/E ratio of 9.50.

The average volume for Ellington Financial has been 85,900 shares per day over the past 30 days. Ellington Financial has a market cap of $633.5 million and is part of the real estate industry. Shares are up 9.8% year-to-date as of the close of trading on Friday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreet Ratings rates Ellington Financial as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • EFC's revenue growth has slightly outpaced the industry average of 3.0%. Since the same quarter one year prior, revenues slightly increased by 3.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The gross profit margin for ELLINGTON FINANCIAL LLC is currently very high, coming in at 73.45%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 99.76% significantly outperformed against the industry average.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • ELLINGTON FINANCIAL LLC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, ELLINGTON FINANCIAL LLC reported lower earnings of $3.46 versus $5.32 in the prior year. For the next year, the market is expecting a contraction of 12.6% in earnings ($3.02 versus $3.46).
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. When compared to other companies in the Capital Markets industry and the overall market, ELLINGTON FINANCIAL LLC's return on equity is below that of both the industry average and the S&P 500.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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